Intermediate Microeconomics
Final Exam Questions
Course Introduction
Intermediate Microeconomics builds on foundational economic principles to deepen students' understanding of how individuals and firms make decisions in various market environments. The course explores topics such as consumer behavior, production and costs, market structures, game theory, and welfare economics, emphasizing mathematical modeling and graphical analysis. Students will analyze how prices are determined, how resources are allocated, and the effects of government policy on market outcomes, preparing them for advanced economic study and practical problem-solving in real-world contexts.
Recommended Textbook Microeconomics 12th Edition by Michael Parkin
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Page 2
Chapter 1: What Is Economics
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Q1) In the above figure, which curve indicates that the level of food production does not affect the population growth rate?
A) F
B) G
C) H
D) I
Answer: C
Q2) One economist says that raising taxes on gas would be in the social interest. What does this economist mean?
A) Higher taxes on gas would benefit society as a whole.
B) Raising taxes on gas would benefit most of the people.
C) Higher taxes on gas would benefit everyone.
D) Both answers A and C are correct.
Answer: A
Q3) A benefit from an increase in activity is called the
A) marginal benefit.
B) economic benefit.
C) total benefit.
D) opportunity benefit.
Answer: A
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Chapter 2: The Economic Problem
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Q1) What is comparative advantage? Give an example.
Answer: Comparative advantage is the ability of a person to produce a good at a lower opportunity cost compared to another person. A lower opportunity cost means that the person gives up less to produce the good compared to another person. For example, one person may need to give up one hour of typing to get dinner made while another person must give up two hours of typing to produce the same dinner.
Q2) If Sam is producing at a point on his production possibilities frontier, then he A) cannot produce any more of either good. B) can produce more of one good only by producing less of the other. C) will be unable to gain from trade.
D) is not subject to scarcity.
Answer: B
Q3) The figure above shows Roger's production possibilities frontier. Point a is an ________ point and at that point production is ________.
A) attainable; efficient
B) attainable; inefficient
C) unattainable; inefficient
D) unattainable; efficient
Answer: B
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Page 4
Chapter 3: Demand and Supply
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Q1) If the demand and supply curves are described by the following equations P = a - bQ and P = c + dQ, respectively, the equilibrium price is P* = (ad + bc) / (b + d).
A)True
B)False
Answer: True
Q2) Suppose a medical study reveals new benefits to consuming beef and at the same time a bumper corn crop reduces the cost of feeding steers. The equilibrium price of beef will
A) fall.
B) perhaps rise, fall, or stay the same, but more information is needed to determine which it does.
C) stay the same.
D) rise.
Answer: B
Q3) A supply curve is also a maximum-supply-price curve.
A)True
B)False
Answer: False
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Chapter 4: Elasticity
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Q1) For inferior goods, the income elasticity of demand is negative.
A)True
B)False
Q2) Explain why the number of substitutes influences the price elasticity of demand.
Q3) The price elasticity of demand is 5.0 if a 10 percent increase in the price results in a ________ decrease in the quantity demanded.
A) 2 percent
B) 5 percent
C) 10 percent
D) 50 percent
Q4) The above figure shows the demand curve for movie rentals from Redbox. If Redbox lowered its price from $2.00 to $1.50, then total revenue would ________ because demand is ________.
A) decrease; elastic
B) increase; elastic
C) decrease; inelastic
D) increase; inelastic
Q5) Can electric utility companies always raise their total revenue by raising their rates?
Q6) Explain why the availability of resources affects the elasticity of supply.
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Chapter 5: Efficiency and Equity
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Q1) The figure illustrates the market for bagels. If the number of bagels is cut from 20 to 10 an hour, the deadweight loss is ________.
A) $0.50 a bagel
B) -$5.00 an hour
C) $0 an hour
D) $5.00 an hour
Q2) In the above figure, of the quantities listed below, for which is the total deadweight loss the largest?
A) 0 units
B) 10 units
C) 20 units
D) 30 units
Q3) The figure above shows Clara's demand for CDs. The price for a CD is $15. Which statement is TRUE?
A) When Clara buys 6 CDs, she receives $15 of consumer surplus on her 6th CD.
B) When Clara buys 6 CDs, she receives a total of $15 of consumer surplus.
C) When Clara buys 6 CDs, she receives a total of $30 of consumer surplus.
D) When Clara buys 6 CDs, she receives a total of $45 of consumer surplus.
Q4) Explain the utilitarianism principle. How is it deficient?
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Chapter 6: Government Actions in Markets
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Q1) A sales tax on sellers a good leads to a loss of consumer surplus, but a price ceiling or a price floor on that same product will not.
A)True
B)False
Q2) Suppose the price elasticity of demand for Mexican food is 1.23 and the price elasticity of supply is 0.47. If the government imposes a tax on Mexican food, do buyers or sellers pay most of the tax? Why?
Q3) A tax is imposed on the sale of a product. As long as neither the supply nor the demand is perfectly elastic or inelastic
A) there is no change in the price paid by the consumers.
B) the price paid by the consumers increases by the full amount of the tax.
C) the price paid by the consumers increases by less than the amount of the tax.
D) the price paid by the consumers increases by more than the amount of the tax.
Q4) To try to help farmers, governments I. set production quotas. II) set price ceilings.
A) I and II
B) only II
C) only I
D) neither I nor II
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Chapter 7: Global Markets in Action
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Q1) In the figure above, the U.S. government's revenue from the tariff is ________.
A) $64 million
B) $32 million
C) $128 million
D) $48 million
Q2) A tariff will benefit
A) domestic producers by maintaining a higher than free-trade price.
B) foreign producers by allowing them to sell at a higher price in markets with tariffs.
C) consumers who are able to better afford domestically produced goods.
D) All of the above answers are correct.
Q3) Reducing a tariff will ________ the domestic production of the good and ________ the total domestic consumption of the good.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
Q4) How does an import quota affect the domestic price of the import, the domestic consumption, the domestic production, and the quantity imported?
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Chapter 8: Utility and Demand
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Q1) As consumption increases, total utility increases
A) at an increasing rate.
B) at a decreasing rate.
C) at a constant rate.
D) and marginal utility increases.
Q2) The above table shows Homer's utility from boxes of doughnuts. As Homer's consumption of doughnuts increases, his
A) marginal utility is positive and increasing.
B) marginal utility is positive but decreasing.
C) marginal utility is negative but increasing.
D) marginal utility is negative and decreasing.
Q3) Michelle spends all of her income on mangos and rice. Mangos cost $2 per pound and rice costs $1.50 per pound. If Michelle is spending all of her income and the marginal utility per dollar spent is 20 for the last pound of mangos purchased and 10 for the last pound of rice purchased, then
A) Michelle is maximizing utility from her present consumption bundle.
B) Michelle should buy more rice and fewer mangos in order to maximize utility.
C) Michelle should buy more mangos and less rice to maximize utility.
D) None of the above answers is correct.
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Page 10
Chapter 9: Possibilities, Preferences, and Choices
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Q1) Lizzie's preferences are shown in the figure above. Which of the following combinations of goods does Lizzie prefer the most?
A) 6 comic books and 20 cookies
B) 8 comic books and 8 cookies
C) 12 comic books and 10 cookies
D) 4 comic books and 12 cookies
Q2) Kristen has an income of $450 per year to spend on music CDs and movies on DVDs. The price of a CD is $15 and the initial price of a DVD is $22.50. The indifference curves in the figure above (I<sub>1</sub>, I<sub>2</sub>, and I<sub>3</sub>) reflect Kristen's preferences. If the price of a DVD falls to $18, the income effect on Kristen's consumption of DVDs ________ the substitution effect, so a DVD is ________ good.
A) partly offsets; an inferior B) partly offsets; a normal
C) reinforces; an inferior D) reinforces; a normal
Q3) What is the marginal rate of substitution and how does it relate to an indifference curve?
Q4) What is an indifference curve?
Q5) What is the meaning of the term "marginal rate of substitution"?
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Chapter 10: Organizing Production
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Q1) If 10 firms share the sales of the market equally, the four-firm concentration ratio is ________ percent.
A) 100
B) 40
C) 10
D) 5
Q2) If the four-firm concentration ratio for an industry equals 100 percent, then definitely
A) the Herfindahl-Hirschman Index (HHI) equals 10,000.
B) the industry is a monopoly.
C) a small number of firms are in the industry.
D) there are no barriers to entry into the industry.
Q3) Giving managers an ownership stake in a company is an example of A) a command system.
B) an incentive system.
C) a system that encourages managers to become agents that monitor their principals.
D) economies of scope.
Q4) What are three major ways that corporations can cope with the principal-agent problem?
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Page 12
Chapter 11: Output and Costs
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Q1) Based on the production data for Pat's Pizza Parlor in the above table, which of the following pair of workers have the same average product?
A) 1 and 2
B) 2 and 4
C) 1 and 5
D) 2 and 5
Q2) The above table shows the total product schedule for the campus book store. If each employee is paid $6 per hour and there are no other variable costs, then at what level of books sold per hour does the marginal cost begin to increase?
A) 41 books per hour
B) 59 books per hour
C) 73 books per hour
D) 90 books per hour
Q3) Average variable cost is equal to
A) average total cost minus average fixed cost.
B) average total cost multiplied by output.
C) total cost divided by output.
D) the change in total cost divided by the change in output.
Q4) In the long run all costs are variable costs. Why?
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Chapter 12: Perfect Competition
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Q1) Fresno County, California is the largest agricultural producing county in the country and almonds are an important crop with more than 99,000 acres harvested. Each acre produces about a ton of almonds and sold at a price of $4300 a ton. The Sagardia Brothers grew 600 acres of almonds that year and they are price takers. What is the Brother's total revenue?
A) $4300
B) $4900
C) $59.4 million
D) $2.58 million
Q2) In the above figure, by increasing its output from Q<sub>2</sub> to Q<sub>3</sub>, the firm
A) reduces its marginal revenue.
B) increases its marginal revenue.
C) decreases its profit.
D) increases its profit.
Q3) In the above figure, the line represented by the "4" is the
A) average fixed cost.
B) marginal revenue.
C) average total cost.
D) marginal cost.
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Chapter 13: Monopoly
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Q1) Which of the following differs between a perfectly competitive market and a market with a perfectly price discriminating monopoly?
A) The amount of producer surplus
B) The quantity produced
C) The total surplus
D) None of the above because they are all the same in a perfectly competitive market and in a market with a perfectly price discriminating monopoly.
Q2) In the above figure, if the natural monopoly is regulated using a marginal cost pricing rule, then the firm will
A) produce 8 million units and make an economic profit of $24 million.
B) produce 12 million units and make zero economic profit.
C) produce 16 million units and incur an economic loss of $64 million.
D) produce 16 million units and make zero economic profit.
Q3) Public franchises create monopolies by restricting A) demand.
B) prices.
C) entry.
D) profit.
Q4) What is price discrimination? Give examples of price discrimination.
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Chapter 14: Monopolistic Competition
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Q1) Fresh Taste, Inc. produces organic breakfast cereals. The market for breakfast cereals is monopolistically competitive. The figure above shows the demand curve that Fresh Taste faces (D), the company's marginal revenue curve (MR), its marginal cost curve (MC), and its average total cost curve (ATC). Fresh Taste's markup is
A) more than zero but less than $1.00.
B) $3.00.
C) $2.00.
D) zero.
Q2) In monopolistic competition, the presence of a large number of firms making a differentiated product means that
A) each firm has some ability to effect the price of its particular good or service.
B) each firm must charge the same price.
C) the price is established by agreements among the different firms.
D) each firm must produce the same quantity.
Q3) In monopolistic competition, product differentiation gives the firms the power to set their prices.
A)True
B)False
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Chapter 15: Oligopoly
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Q1) As the Federal Trade Commission currently interprets the Herfindahl-Hirschman index (HHI), an industry is considered to be highly concentrated if the HHI value is above
A) 100.
B) 1,000.
C) 2,500.
D) 5,000.
Q2) Using the market shares in the table above, if Widgotech buys Widgette the HHI will A) stay the same.
B) rise by 1 point.
C) rise by 10 points.
D) rise by 18 points.
Q3) In ________ market structure, a firm's output depends ________.
A) an oligopoly; only on its own marginal revenue and marginal cost curves
B) a monopolistically competitive; in part on its competitors' price and quantity decisions
C) an oligopoly; in part on its competitors' price and quantity decisions
D) a monopolistically competitive; only on its marginal revenue curve
Q4) How is a contestable market similar to a perfectly competitive one?
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Page 17
Chapter 16: Public Choices, Public Goods, and Healthcare
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Q1) The table above provides information about the marginal social cost and marginal social benefit of street lights, which are a public good.
a) What quantity would a private company provide? Why?
b) What is the efficient quantity?
Q2) Rational ignorance suggests that voters will
A) be ignorant about all issues.
B) be ignorant about issues that are of no special interest to them.
C) pursue information on all issues before voting.
D) avoid voting if they have no information.
Q3) The table above gives information on the marginal perceived private benefit and marginal social benefit associated with vaccination against varicella (chicken pox). If the marginal cost of a varicella vaccination is $10, then the unregulated competitive equilibrium will have
A) 2 million vaccinations.
B) 3 million vaccinations.
C) 4 million vaccinations.
D) 5 million vaccinations.
Q4) What is a nonrival good? Give an example.
Q5) What is the principle of minimum differentiation?
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Chapter 17: Externalities
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Q1) If the marginal social cost of a good is $70 and the marginal external cost is $20, what does the marginal private cost equal?
Q2) The figure above shows the marginal social costs (MSC), marginal private benefits (MB), and marginal social benefits (MSB) of college education in Inland. If Inland's government does not intervene, and the colleges are competitive, ________ million students are enrolled, and the tuition is ________ per year.
A) 0.8; $7,000
B) 0.6; $6,000
C) 0.6; $9,000
D) 0.8; $5,000
Q3) In the above figure, to achieve the efficient amount of paper production, the government could impose a tax of
A) $2 per ton.
B) $8 per ton.
C) $26 per ton.
D) zero, because the efficient amount is produced with no government intervention.
Q4) What is the tragedy of the commons?
Q5) What do we mean by "property rights" and why are they important?
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Chapter 18: Markets for Factors of Production
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Q1) An increase in the price of a firm's output increases the firm's demand for labor because the
A) marginal product of each worker increases.
B) value of marginal product of each worker increases.
C) value of marginal product curve becomes steeper.
D) value of marginal product curve becomes flatter.
Q2) The figure above shows a local lawn cutting service's demand for labor curve when the price of cutting an acre of lawn is $50 per acre. How much labor will the firm hire if the market wage is $300 per day?
A) 0 workers
B) 1 worker
C) 2 workers
D) 3 workers
Q3) The present value of $100 to be received in the year 2014 is
A) less than the present value of $100 to be received in 2015.
B) greater than the present value of $100 to be received in 2015.
C) the same as the present value of $100 to be received in 2015.
D) greater than the present value of $100 to be received in 2015 if the interest rate in 2015 exceeds the interest rate in 2014; otherwise, it is less.
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Page 20
Chapter 19: Economic Inequality
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Q1) In the above figure, if the Lorenz curve were to move closer to the diagonal line containing points b and c, the income distribution would be
A) more unequal.
B) more equal.
C) unchanged.
D) More information is needed to determine how this change would affect the income distribution.
Q2) Sue has human capital worth $500,000 and nonhuman capital of $100,000. Todd has human capital worth $10,000 and nonhuman capital of $50,000. The return on each type of capital is 10 percent a year. According to the Census Bureau in the national wealth and income survey, Sue is ________.
A) as wealthy as Todd
B) 10 times wealthier than Todd
C) twice as wealthy as Todd
D) 50 times wealthier than Todd
Q3) What is the difference between market income and money income? Which is more equally distributed?
Q4) Explain how redistributing income creates a deadweight loss.
Q5) Describe the effect education and training have on outcomes in the labor market.
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Chapter 20: Uncertainty and Information
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Q1) There is a growing market for buying and selling information about the online behavior of consumers. Most people use one of only a small number of search engines (such as Google, Bing, or Yahoo!) when surfing the net. It has been hard for new search engines to gain any market share. The market for search is best considered as A) perfectly competitive.
B) oligopoly.
C) monopolistically competitive.
D) monopoly.
Q2) Adverse selection can occur when
A) all parties have full information.
B) one party has information not available to the other party.
C) incentives result in one party not reaching an agreement with the other party.
D) nobody has any information.
Q3) Signals are believable when the cost of sending a
A) false signal is known to be low.
B) false signal is known to be high.
C) true or false signal is known to be low.
D) true signal is known to be high.
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